What do depository institutions include

Credit unions are owned by their members, who receive shares of their profits. They offer almost anything that a commercial bank or savings and loan does, including savings accounts, checking accounts, home and car loans, credit cards, and even some commercial loans. Finance companies are nondeposit institutions because they do not accept deposits from individuals or provide traditional banking services, such as checking accounts.

They do, however, make loans to individuals and businesses, using funds acquired by selling securities or borrowed from commercial banks. Those that lend money to businesses, such as General Electric Capital Corporation, are commercial finance companies , and those that make loans to individuals or issue credit cards, such a Citgroup, are consumer finance companies.

Some, such as General Motors Acceptance Corporation, provide loans to both consumers car buyers and businesses GM dealers. Insurance companies sell protection against losses incurred by illness, disability, death, and property damage. To finance claims payments, they collect premiums from policyholders, which they invest in stocks, bonds, and other assets. They also use a portion of their funds to make loans to individuals, businesses, and government agencies. Companies like A.

Rowe Price, which buy and sell stocks, bonds, and other investments for clients, are brokerage firms also called securities investment dealers. A mutual fund invests money from a pool of investors in stocks, bonds, and other securities.

Investors become part owners of the fund. Mutual funds reduce risk by diversifying investment: because assets are invested in dozens of companies in a variety of industries, poor performance by some firms is usually offset by good performance by others.

Mutual funds may be stock funds, bond funds, and money market funds , which invest in safe, highly liquid securities. Liquidity is the speed with which an asset can be converted to cash. Finally, pension funds , which manage contributions made by participating employees and employers and provide members with retirement income, are also nondeposit institutions. You can appreciate the diversity of the services offered by commercial banks, savings banks, and credit unions by visiting their Web sites.

It lends money for homes, cars, college, and other personal and business needs. Wells Fargo even offers life, auto, disability, and homeowners insurance. It also provides electronic banking for customers who want to check balances, transfer funds, and pay bills online.

How would you react if you put your life savings in a bank and then, when you went to withdraw it, learned that the bank had failed—that your money no longer existed? This is exactly what happened to many people during the Great Depression. In response to the crisis, the federal government established the Federal Depository Insurance Corporation FDIC in to restore confidence in the banking system. Nontransaction deposits are deposits in savings and time deposit accounts, where withdrawals are limited.

However, since nontransaction deposits do not provide payment services, the main benefit to depositors is the interest that they pay. Banks can pay a lower rate of interest on deposits because the funds that they hold are guaranteed by the Federal Deposit Insurance Corporation FDIC up to a certain limit.

Years ago, most savings accounts were passbook savings accounts , where each transaction was recorded in the customer's passbook.

Nowadays, transactions are recorded electronically. Most savings accounts pay a low interest rate, but allow the depositor to withdraw funds at will. However, if a depositor makes too many withdrawals within a month, the bank will charge a fee for withdrawals above the limit. Banks also offer time deposits in the form of certificates of deposit CDs that has a specified term and face value, which equals the amount deposited.

The withdrawal of funds is restricted until the CD matures. The interest rate on a CD is commensurate with its term length. The bank will charge the CD holder fees for withdrawing the money before the maturity date. Banks can obtain quick funds by selling large CDs in the money markets, in addition to selling commercial paper and bonds. Most banks borrow in the interbank market , known as the federal funds market , so called because the money, both lent and borrowed, is held in the banks' accounts at the Federal Reserve, called federal funds.

Banks with excess reserves lend money to banks with a deficit in reserves. These loans are unsecured so banks only lend to banks they can trust. Usually, smaller banks have the excess reserves to lend while large banks in major metropolitan areas need to borrow. Banks can also borrow directly from the Federal Reserve through its discount window if it cannot obtain a loan from other banks.

However, this is used as a last resort, since it indicates to the Federal Reserve that the bank is under financial stress.

A trader or hedger looking to take actual delivery on a futures contract must first establish a long buy futures position and wait until a short seller tenders a notice to delivery. With gold futures contracts, the seller is committing to deliver the gold to the buyer at the contract expiry date. The seller must have the metal—in this case, gold—in an approved depository.

This is represented by holding COMEX approved electronic depository warrants which are required to make or take delivery. The three main types of depository institutions are credit unions , savings institutions, and commercial banks.

The main source of funding for these institutions is through deposits from customers. A depository's institutional function or type determines which agency or agencies are responsible for its oversight. Credit unions are nonprofit companies highly focused on customer services. Customers make deposits into a credit union account, which is similar to buying shares in that credit union.

Credit union earnings are distributed in the form of dividends to every customer. Savings institutions are for-profit companies also known as savings and loan institutions. These institutions focus primarily on consumer mortgage lending but may also offer credit cards and commercial loans. Customers deposit money into an account, which buys shares in the company. For example, a savings institution may approve 71, mortgage loans, real estate loans, , credit cards, and , auto and personal consumer loans while earning interest on all these products during a single fiscal year.

Commercial banks are for-profit companies and are the largest type of depository institutions. These banks offer a range of services to consumers and businesses such as checking accounts, consumer and commercial loans, credit cards, and investment products. These institutions accept deposits and primarily use the deposits to offer mortgage loans, commercial loans, and real estate loans. A depository is not the same thing as a repository, although they can often be confused.

A repository is where things are kept for safekeeping. But unlike a depository, the items kept in a repository are generally abstract such as knowledge. For instance, data can be kept in a software repository or a central location where files are housed. Investopedia is also considered a repository—in this case, it's a repository for financial information. Euroclear is a clearinghouse that acts as a central securities depository for its clients, many of whom trade on European exchanges.

Most of its clients comprise of banks, broker-dealers , and other institutions professionally engaged in managing new issues of securities, market-making, trading, or holding a wide variety of securities.

Euroclear settles domestic and international securities transactions, covering bonds, equities, derivatives , and investment funds. Domestic securities from more than 40 markets are accepted in the system, covering a broad range of internationally traded fixed and floating rate debt instruments , convertibles, warrants and equities.

This includes domestic debt instruments, short- and medium-term instruments, equities and equity-linked instruments, and international bonds from the major markets of Europe, Asia-Pacific, Africa and the Americas. CME Group. Accessed Aug. Federal Deposit Insurance Corporation.

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